The webdefault.xml file is a specific instance of the standard web.xml deployment descriptor that is applied to all webapplications before their own web.xml. It is used by Jetty to configure the standard mechanisms such as JSP, the default servlet and the Invoker.
There is no fixed location (or name) for the webdefault.xml file. It can be specified explicitly for a webapp by calling org.mortbay.jetty.webapp.WebAppContext.setDefaultsDescriptor(String filename). Jetty will look for a file of this name on the classloader classpath, or failing that it tries on the filesystem. If this method isn't called, then the webdefault.xml file in the jetty.jar is used.